US companies perform well in China, with increasing optimism about the prospect
According to the White Paper released by the American Chamber of Commerce in China(AmCham-China), among their survey respondents, 85 percent reported revenue growth in 2010; 78 percent reported profitable or very profitable performance; 63 percent reported margins improved over the prior year; and 41 percent reported margins in China were better than global margins. Given these results, the scale of the market and its projected future growth, it should not be surprising that 83 percent of respondents reported that they plan to increase investment in China in 2011. In general, confdence in the market is high, expansion is the medium-term objective and managing growth is the immediate problem.
However, US investment in China dropped sharply by 28 percent, while foreign direct investment (FDI) maintained double-digit growth from January to April, the Ministry of Commerce said on the routine press conference on May 17. US investment from January to April decreased to $1.03 billion and the number of US firms setting up in China also fell by 3.85 percent to 475. In contrast, European Union investment rose by 23.42 percent to $2.64 billion. Investment from the Asia-Pacific region, including Japan, South Korea and Singapore, registered growth of 31.23 percent to$32.88 billion.
Economists said they believed the US investment decline is temporary, and the Chinese economy, over the long term, will provide US companies with increased investment opportunities.
“US businesses are generally positive about China’s investment environment, Yao Jian, commerce ministry spokesman, said at the news briefing, “so the short term decline may be owing to the statistic methods. Some American companies registered in Hong Kong and Asia were categoried into the item of Asian companies.”
While Tu Xinquan Professor and Vice Dean of WTO Research Institute, University of International Business and Economics expressed this was just a short-term data, which can not reflect the trend.
“US investment could drop further over the short-term,” Song Hong, head of the Department of International Trade at the Chinese Academy of Social Sciences, said.
Song attributed this to a decline in US manufacturing, a key component of US investment, following the global financial crisis. He also said that with the recovery in
the US economy, businesses that had nvested in China were returning to the US market.
But others cited rising labor costs as a reason.
China announced in April 2010 that it would try to attract more foreign nvestment in the high-tech, energy and service sectors, a switch in focus from ow-end manufacturing.
“We expect the US to encourage more high-end investment into China, particularly in the service sector,” Yao said.
The White Paper also expressed their confidence in the opportunities n next 5 years in China. It said that China’s 12th Five-Year Plan realistically proposes the goal that China grow at a slower rate of seven percent per year and shift to a domestic demanddriven model. This will require growth of house-hold income, development of services, and large investments in education, healthcare and the pension system.
There will also be large investments in energy efficiency and new technology intended to increase productivity. Senior leaders have stated that successful execution of the 12th FiveYear Plan necessitates deepening and accelerating reform and opening, and giving greater scope for foreign capital n China’s markets.
Still with some worries
The AmCham China listed the problems that their member companies confronted in China and proposed some suggestions for both governments. According to their survey, the top five business challenges were:
? Bureaucracy,
? Management-level human resources constraints,
? Unclear laws and regulations,
? Inconsistent regulatory interpretation, and
? Intellectual property rights (IPR) infringement.
It is striking that three of the top five challenges relate directly to government performance and one relates indirectly in the sense that enforcement by the authorities has been inadequate to deter intellectual property rights infringement. This theme continues if issues are looked at further down the list:
Corruption,
? Obtaining required licenses,
? Non-management level human resources,
? National protectionism,
? Local protectionism, and
? Diffculty enforcing contract terms.
When asked about the opinion on the problems and suggestions that the White Paper proposed to the Chinese Government, Yao Jian, spokesman of the MOFCOM expressed most of their suggestions were reasonable and the Chinese Government should take measures to improve.
Christian Murck, President of AmCham China, expressed his great appreciation on Chinese government’s extension for the 6-month campaign of crashing down IPR breaching acts.
At the 3rd round of S&E D, Chinese Government also pledged to strengthen the IPR protection and further improve the business environment etc.
While on the high-tech products export control issue, China have been urging the US to ease the control. The AmCham China also expressed that the overly restrictive regulations and policies result in ineffective controls and unintended consequences, such as lost US export opportunities and diminished revenues for US companies that harm US economic and national security goals. Before the S&E D, Christian Murck, told the reporter that they would do some lobby in Washington on this issue. At this round of Dialogue, the US promised to ease the control and try to acknowledge China’s market economy status as soon as possible.
S&E D should help further mutual economic cooperation
On May 10, the two-day 3 rd round of Sino-US Strategic & Economic Dialogue ended in Washington with the two sides signing 112 agreements, of which 64 are in economic sector and 48 are on strategic level. U.S.-China Comprehensive Framework for Promoting Strong, Sustainable and Balanced Growth and Economic Cooperation was also signed in this round of Dialogue. “The United States and China affirm that both countries will, based on common interest, promote more extensive economic cooperation, from a strategic, long-term, and overarching perspective, to work together to build a comprehensive and mutually beneficial economic partnership, add to prosperity and welfare in the two countries, and achieve strong, sustainable, and balanced growth of the world economy,” noted the framework.
Both countries aimed at taking measures to promote more balanced bilateral trade, resolving trade and investment disputes in a constructive and cooperative manner, exploring new cooperation opportunities in the process of transforming and restructuring their economies, developing sub-national economic cooperation and deepening cooperation in the financial sector.
“Generally, this round of dialogue is very positive. And both China and US tried to avoid quarrel on the dispute, but more on dialogue, pledging on reducing the barrier for mutual investment and trade exchange in their respective domestic countries. Though I am not optimistic about the US’ commitment on acknowledging China’s market economy status, I still say the Dialogue is positive and helpful for the cooperation of the two countries.” Tu Xinquan, told the reporter.